§1667b Lessee’s Liability on Expiration or Termination of Lease

Summary

When a renter may owe money at the end of a lease based on the estimated leftover (residual) value, that estimate must be a reasonable guess of the property’s fair market value at lease end. If the estimate is more than the actual value by over three times the average monthly payment under the lease, it is assumed to be unreasonable and not in good faith unless the owner proves otherwise. The owner cannot collect that extra amount unless they sue and win, and the owner must pay the renter’s reasonable lawyer fees. That rule does not apply if the gap is caused by damage beyond normal wear and tear or by excessive use; leases may set fair standards for wear and use. Charges for late payment, default, or ending the lease early are allowed but must be reasonable. If there is a residual charge at lease end, the renter may, at their own cost, get an independent professional appraisal that both sides accept, and that appraisal is final.